Overcoming Participants’ Skepticism to Provide Personal Financial Information

Franklin Templeton finds many employees are hesitant to share in-depth details on their finances, even though it can lead to more customized benefits information and strategies.

Plan sponsors are increasingly aiming to develop the clearest possible picture of their retirement plan participants’ retirement readiness, but they often have to do so without additional in-depth financial information from their employees. But employers, advisers and recordkeepers can perhaps take comfort that participants’ lack of interest in personalization appears to be breaking, according to sources.

The retirement industry has accelerated its efforts to encourage participants to include additional financial information in their benefits. Experts say having more detailed information provides participants with the most accurate benefits picture possible and greater personalization because it helps plan sponsors and recordkeepers understand participants’ exact retirement readiness, including the percent of income replacement they can expect in retirement and the monthly income they will receive.

But only 36% of participants are willing to share in-depth personal financial information—e.g., account balances, investments and financial planning goals—in exchange for greater benefit personalization, according to the Franklin Templeton “Voice of the American Worker Survey.” 

“This is challenging,” says Jacque Reardon, director of retirement marketing, U.S., at Franklin Templeton. “It’s important to know as much about someone’s full financial picture as possible in order to properly provide strategies to help them meet their unique goals.”

Reardon adds that the survey found that 68% of participants want their employer to recommend financial strategies that are based on their specific financial goals.

“What’s extremely clear in our research, however, is that the expectation for personalized benefits is becoming the standard, [as] 84% of workers today feel that financial independence is the most important goal,” Reardon explains. “Those types of expectations require a more individual goals-based approach—which requires personal information.”   

Plan sponsors and recordkeepers are able to personalize participants’ investments, asset allocations, retirement glide paths and more with greater in-depth financial information.

Despite the survey finding ongoing participant hesitancy, there is good news for plan sponsors here, Reardon adds.

“Our research found that 87% of US workers would be comfortable sharing some kind of information with employers in exchange for more personalized benefits,” Reardon says. “If we dive in deeper to why there is hesitancy in providing more in-depth information, we can only surmise that perhaps the heightened attention to ‘information security’ in the past few years has made people a bit weary of sharing.”

Reardon explains that people might wonder, “‘Why am I being asked to share this information? What safeguards are in place to make sure my information is used only for its intended purpose? What added benefit is available to me in sharing this information?’”

Reardon also notes that hesitancy varies between generations, as, among Millennials, 92% are willing to share additional in-depth financial information with their employer in exchange for more personalized benefits, compared with 96% of Generation Z participants and only 77% of Baby Boomers.

Participants are also wary about sharing financial details because many are taught from a very young age to closely guard such personal information, says Greg Adams, consultant at Fiducient Advisors.

Cognitive biases and responses rooted in behavioral finance and emotion are also at work, he explains.

“Some people are scared of the results, so if they don’t know what they are saving for retirement, they can assume it’s going well,” Adams adds. “There might be some hesitancy there. Those three components are part of it: Cybersecurity, the idea it is personal and private, and then the fear of getting the results.”

Participants are also wary of sharing additional financial information because they want to avoid mailers and financial service advertising, Adams adds.

Some worry that, “‘Now we’re going to get bombarded with emails and phone calls [for] life insurance and all financial planning about any other service that can be offered,’” he says. “I think there’s a concern for participants about that.”

Although participants are hesitant to provide additional in-depth financial information, 63% are willing to share basic information in exchange for greater personalization—including address, dates of birth and hometowns—and 46% are disposed to provide details on race, gender identity and marital status, the Franklin Templeton survey finds.   

“Most U.S. workers feel comfortable sharing basic information such as date of birth and demographic information in exchange for benefit personalization, but once you move to more in-depth information like account balances and investments held elsewhere, that percentage is cut in half,” Reardon says. “There is a seed to build upon: 55% of U.S. workers say they’d prefer their employer use all available information to personalize their benefits as much as possible compared to 45% who say they’d prefer their employer collect as little of their personal information as possible and offer the same benefits to everyone.”

Don’t Take It Personal

Plan sponsors, recordkeepers and participants all share the burden to overcome the hesitancy workers show, sources say, as each has their own avenue in which to act.

It’s key that employers provide education to participants to create a transparent system that workers trust. That may prompt greater comfort in sharing the information that is needed “in order to craft improved solutions,” Reardon explains.

“Education about WHY the employer is seeking this more in-depth information, HOW their personal information is going to be used (and importantly what the employer will do to protect that information), and clear expectations of the benefits of providing this in-depth information (for example, without this information an employee can only expect this type of benefit but if you add XYZ data we can provide this type of enhanced benefit) will go a long way to tipping the scales further in favor of getting employees comfortable with providing information,” Reardon says.

Plan sponsors and recordkeepers should also make participants aware of technology improvements made on their behalf whenever cybersecurity reviews and updates, technology upgrades, and tweaks that limit the use of participant data are completed, Adams says.

Retirement plan advisers can also help explain and reaffirm to participants what the plan sponsor and recordkeeper have done on their behalf. In other words, advisers can serve as a trusted source. And participants must be actively engaged to guard access to their data by taking advantage of online security tools that use two-factor authentication, Adams concludes.